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VICTORIA — Premier Christy Clark promised this week’s update on provincial would be “not pretty,” and she got that one right.

The Liberals were already facing an uphill challenge to bring the books into balance, with too many spending priorities chasing not enough revenue.

But the problem is getting harder, not easier, according to the progress report on the financial year, released Wednesday by Finance Minister Mike de Jong.

His predecessor as finance minister, Kevin Falcon, forecast a $1-billion deficit for the year beginning April 1 past and ending next March 31. That was a big gap for a government pledged to table a balanced budget in time for the May 2013 provincial election.

But with de Jong’s latest update, the deficit forecast has been raised 50 per cent, to $1.5 billion, even with the government’s continuing effort to rein in discretionary spending in some areas like travel and consulting contracts.

Looking at the detailed reasons for the slide, one of the biggest declines was in revenues from natural gas, driven downward by low prices and slumping markets.

The government budgeted $400 million in natural gas royalties, after averaging the price projections of two dozen internationally recognized forecasting agencies.

But the North America-wide growth in production of gas extracted from shale rock has driven prices lower than the forecast. Cheaper gas elsewhere means fewer customers for the B.C. product, consequently not as much gas was produced and sold.

End result: the province now expects to realize just $157 million in natural gas royalties for the year.

Indeed, were it not for the foresight of the independent watchdog on provincial finances, the treasury would be in worse shape vis-a-vis revenues from the natural gas resource.

Some years back, the auditor general directed the province to spread the proceeds from its annual sale of drilling leases over the nine-year life of the lease, thereby evening out the proceeds from good years and bad.

Consequently, the province is still enjoying the financial fruits of record years when sales reached as high as $2.6 billion, even though sales have fallen off dramatically with the surge in exploration and development elsewhere on the continent.

The provincial share from the sale of natural gas rights (bonus bids, fees and rentals) is booked at $866 million for the current financial year, a total that is almost entirely due to sales from earlier years. But sales to date are running at a mere $28 million, according to the latest posting by the ministry of energy, mines and natural gas.

All of which underscores the real urgency behind the push to begin producing liquefied natural gas for export to Asian markets. It is as much about shoring up existing production (and hence revenues) as growing either.

Several other sources of revenue anxiety were apparent in de Jong’s update.

Mineral revenue is projected to be off by $144 million, attributed to “weaker coal sales, reflecting lower coal prices and shipments” and to “rising mining costs,” not specified.

The treasury is also taking a $123-million hit from the battered housing market, reflected in a large drop in proceeds from the provincial tax on property sales and a smaller drop from property taxes, arising from lower assessments.

Not much the province can do in the short run to improve any of those sources of revenues. So it ought to be scaling back its expectations for next year.

To mention just one example, the plan to balance next year’s budget was initially predicated on $652 million from natural gas royalties. Not likely, now that the current year is projected to bring a quarter as much.

The finance minister can look to a helping hand from some other revenue sources. The federal finance department has lately advised the province of better-than-forecast returns from its share of income taxes. A major sale of government property is expected to close next summer, bringing $300 million.

But de Jong didn’t deny that even with those windfalls, he’s still scrambling to find the money to balance the budget as promised next year.

He didn’t rule out tax increases, though I doubt the Liberals would go that route in an election year, especially when the New Democrats are saying they don’t see much room to raise taxes.

Which leaves the spending side. I’d guess that the minister and his colleagues would need to cut away at least $300 million from next year’s spending estimates, and maybe twice that to be sure of offsetting the expected decline in revenues as well as create the necessary margin of safety for a plausibly balanced budget.

For as de Jong also conceded Wednesday, the Liberals not only face a revenue problem, they have a credibility problem. Their last election-eve budget was so far off the mark as to cast a pall of doubt over next year’s exercise, whatever form it takes.

He reckons he might be able to pull it off, if the growth and revenue projections in his budget are in line with those of independent forecasters and the spending is held to a level that leaves room for a $200-million to $300-million surplus.

But that would be a tall order in a pretty year, never mind the one suggested by his own financial statements.

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